GST on Petrol

The AA has called for GST to be removed on the excise portion of petrol, reports the Herald.

AA spokesman Mark Stockdale last night urged the Government to consider removing GST on petrol excise tax, a move it says could cut prices by more than 5c a litre. …

But a statement from Finance Minister Michael Cullen’s office last night said the Government would not change the GST system, “as creating exemptions would add extra compliance costs for businesses which would be passed on to consumers”.

A one-off change to GST would have had no effect against the “global forces” driving petrol prices.

“If the New Zealand Government had changed GST rules along these lines 12 months ago, no one would have even noticed as the benefits would have been wiped out almost immediately by the global rise in oil prices,” the statement said.

I’m with Dr Cullen on this one. First of all I think an absolute strength of GST is that is is near universal for all goods and services. The moment you start varying out a few exemptions, you then end up in an endless litany of moral judgements on what should or should not have GST on it. In Australia you have (or had) GST on your bread if it has sultanas in it, but no GST if no sultanas.

Cullen is also right that piddling about with stuff that will knock 5c a litre off only, when retail prices have almost doubled in the last few years, will not even be noticed.